Like CFG, we have been supporting not-for-profit organisations for many years and we were proud to sponsor their Annual Dinner. As CFG celebrated 30 years of supporting charities this year, we asked dinner guests to share their advice to charities for surviving 30 years in the sector. With the landscape changing rapidly for charities, a little advice can go a long way. From the advice shared by charities, three themes stood out in the responses. Being bold and ‘positively disruptive’ As the regulatory climate in the charity sector evolves with changes like the introduction of General Data Protection Regulation (GDPR), the […]

Like CFG, we have been supporting not-for-profit organisations for many years and we were proud to sponsor their Annual Dinner. As CFG celebrated 30 years of supporting charities this year, we asked dinner guests to share their advice to charities for surviving 30 years in the sector. With the landscape changing rapidly for charities, a little advice can go a long way. From the advice shared by charities, three themes stood out in the responses.

Being bold and ‘positively disruptive’

As the regulatory climate in the charity sector evolves with changes like the introduction of General Data Protection Regulation (GDPR), the Fundraising Regulator and the rise of Insurance Premium Tax (IPT), it can be perceived as a tougher environment for charities looking to make bold decisions.

Charities showed us that they still have an appetite for being bold and innovative. This is causing charities to make changes to the way they operate through adaptation of new fundraising models, collaboration and structural changes. In this environment, reacting quickly can be the best way to be impactful.

Here’s what charities had to say:

“Think long term, keep on learning, adapt to technology and stay ahead of changes in the industry.”

“Think light-footed, responsive, digitally-enabled and able to be positively disruptive when you think about your organisational structure.”

“Be bold in your purpose. Talk positively about what you are trying to do and honestly about progress made. State what support you need. That will convince others to support you, financially or otherwise.”

Being bold takes confidence, for more on how trustees can protect themselves, see David Britton’s guest blog for the Charity Times on 5 tips to help manage risks.

‘Be honest about what you’re trying to achieve.’

When New Philanthropy Capital (NPC) asked charities what they thought would help rebuild trust in the sector, 85% of charities agreed that being more transparent about how money is spent and demonstrating impact would be effective.

Advice from charities:

“Always be as open and transparent as possible about what you are trying to do, who you are trying to help and why you are spending money in the way that you are. These basics often get temporarily forgotten along the way.”

“Talk positively about what you are trying to do and honestly about progress made.”

“Keep on learning and adapting, it will help you to stay ahead of changes in the industry.”

“Ensure you have appropriate financial expertise in the team, and remember that it’s not about size – i.e. a smaller organisation still needs a high level of financial professionalism – and integrity!”

Balance the need of those you help today with those you help in the future

Charities who responded balanced their eagerness to be bold with a little caution. Longer-term strategy and financial plans were to be encouraged to ensure resilience through tough times. This was reinforced by Ecclesiastical customers who revealed the top concern for charities over the next 12 months is a lack of funding.[1] With careful planning, charities can ensure funds are available at all times.

Charities gave strategic advice to ensure longevity:

“Make sure there’s a focus on building reserves so that you have access to funds through the good times and the bad.”

“Make sure there is a clear and powerful statement purpose that is distinct from existing charities.”

“Take time to prepare a proper business plan, including sensitivity analysis, in advance of pressing the button”

“Make sure you have a robust business case, it may be a charity but it needs to be resilient.”

Being bold is good. Charities just need to balance bold moves within their strategy enabled by careful risk management and contingency planning to make sure they stand the test of time.

One final important piece of advice was shared on the night: “do subscribe to CFG, lots of help in there”!

In January, CFG held its Investment Conference 2017. Instead of a ‘conference’ style format, delegates were seated at round tables hosted by CFG’s corporate partners. The aim of this new approach is to generate lively discussions around three topical issues and to give delegates and hosts the chance to meet more people. Delegates gave fantastic feedback on the new format overall, several commented that it was ‘really useful to be able to talk one-on-one with investment experts, and discuss issues with peers’. The new format also enables CFG to report back, so that the discussions and thinking can be shared […]

In January, CFG held its Investment Conference 2017. Instead of a ‘conference’ style format, delegates were seated at round tables hosted by CFG’s corporate partners. The aim of this new approach is to generate lively discussions around three topical issues and to give delegates and hosts the chance to meet more people.

Delegates gave fantastic feedback on the new format overall, several commented that it was ‘really useful to be able to talk one-on-one with investment experts, and discuss issues with peers’.

The new format also enables CFG to report back, so that the discussions and thinking can be shared with people who couldn’t make it to the conference. Whilst of course there’s no substitute for being there on the day, the following is a report of some of the discussions, which we hope you find interesting. With many thanks to three of our hosts: Investec, Sarasin & Partners and Quilter Cheviot for facilitating discussions and writing up session notes.

Investment 2017 was framed around three plenary sessions by invited speakers:

CFG’s Andrew O’Brien spoke to Conference about the changing landscape of funding, and its impact on decision-making around investments and reserves.

General funding environment

In the discussion that followed, delegates expressed concerns around austerity and the difficulty and lead-in time in securing grant funding, which hit small charities the hardest. Conversely, there was a feeling that bigger charities are getting bigger and taking a much larger slice of the fundraising pie – brand recognition is critical.

Funding is also unpredictable which makes it difficult to plan. Where funds have been withdrawn from an on-going programme, it’s not only beneficiaries that suffered, but also the charity’s reputation. Some charities, however, reported that they had had recent successes with lottery funding.

There was a mixed experience of fundraising among delegates, with a couple that didn’t fundraise at all, and one of whom was about to embark on fundraising for the first time. In this instance, trustees were mindful of new regulations and keen to ensure an appropriate framework was in place.

While many agreed that the pressure on staff costs and pensions is being exacerbated, some pointed out that the increase in the National Living Wage is welcomed as a positive development for their beneficiaries. The continuing negative press coverage of charity fundraising is damaging and it’s difficult to change the public’s perception. It will only happen with a continuous, collective effort from the Charity Commission and all umbrella organisations.

One table noted that charities are taking a much more robust approach to governance, although given their resources, small charities found it more difficult. Finally, many felt that we need to challenge Government for better demarcation between the state and the voluntary sector’s responsibilities.

Partnerships, joint ventures and mergers

While there’s a generally positive view of partnerships and joint ventures, some had looked at building partnerships but these had rarely worked and exacerbated operational inefficiencies.

Mergers are seen as much more of a challenge, because of the need to unify trustees and staff across different organisations, and the cost and the time and cost involved. It was recognised that most mergers happen to protect beneficiaries where a charity is in difficulty.

Concerns were expressed around the potential loss of local connection when charity mergers were purely predicated on efficiency savings and perhaps an umbrella structure may be a more appropriate route to take.

Investment v reserves

A common thread throughout this discussion was the negative impact of reserves on donor perceptions, with donors raising concerns about growth in reserves.

On one table, charities felt their own specific characteristics were more important than any macro-economic impact from funding. Recent strength in investment portfolios had prompted one charity to proactively start to run down reserves. This opened up the issue of CC19 encouraging charities to build up reserves for a rainy day.

One charity had been improving its buildings and services funded from the investment portfolio. If there was an impact from higher wages and inflation, they had other financing options available such as cheap loans and other grants.

Another charity described how income from fundraising and trading was far more important to them than investment, so investment strategies weren’t key for them. Some charities do consider today’s requirements over preserving investments for future generations but often portfolios are not substantial enough to make a meaningful difference.

Session 2

James Brooke Turner‘s presentation on governance highlighted the huge variations across charities in both size of portfolios, governance structures, and ability to buy-in specialist consultancy. However many of the points he made resonated with charities of all sizes.

Funding structures and size of portfolios were both key factors in determining acceptable levels of risk, return trade-offs and the degree of involvement that trustees had in managing a charity’s investment portfolio. Charities represented at the conference varied significantly in their primary source of income generation, with some securing funding through subscriptions and memberships and others depending primarily on their portfolio for income.

Investment committees

Concerns were raised over how to deal with a committee which did not have the expertise particularly around understanding and setting a risk budget that was appropriate for the organisation. In addition some expressed concerns about trustees being overly cautious in fear of rather than making decisions for the long-term future of the charity, and noted the need to ensure that the amount of time devoted to discussing investments was commensurate with its importance to the charity as a whole.

Another issue raised was the importance of ensuring the board, investment committee and decision-making wasn’t dominated by one person who was seen as expert in investments, even if they are an investment professional, with some commenting that it was worthwhile reminding the board of the ‘equal voice and equal responsibility’ ethos.

For some, a lack of dialogue between boards and investment committees had proved problematic, but had mitigated this by having a lay trustee on the finance committee, who could also give an objective view of any changes in a charity’s operating environment which might influence its investment strategy.

When to source expert help

When should charities employ an investment consultant? And if you do employ one, how do you ensure they’re working hard for you? Again, there was a split between those charities who either couldn’t afford external support (or who felt it was difficult to justify it) and those who could.

Questions were raised and discussed about how effective charities are at challenging their investment managers, with some reporting that rather than setting the agenda, investment committees were following that of their investment manager.

Small charities should not feel like second-class citizens. In a competitive market with a wide variety of investment managers, small charities should have high expectations and challenge their investment manager where they feel unloved.

Clear communication between the charity and its investment manager about trustees’ expectations on the remit and level of service is critical. Charities should review investments regularly and serious consideration should be given to whether manager is value for money and delivering the returns that enable the charity to meet its objects.

Asset allocations

For some, asset allocation decisions are made by the charity itself if they have an experienced investment team on board. However, for charities who don’t have this capacity it is likely to be a two way communication between the charity and the investment manager, with or without the involvement of a consultant.

In order to determine the asset allocation policy the charity must decide what it has to achieve in the short term and what it aspires to achieve in the medium and long term. It was agreed that getting advice was essential and mandatory, in line with the Charity Commission’s CC14.

To find out more about CC14 and the key principles of charity investment, CFG’s Foundation Investment Course was recommended. Offered in association with Sarasin and Partners, the course also covers the Charity Investors’ Group advice on writing a charity investment portfolio. The next course is in London on 19 April, and is open to members and non-members: http://www.cfg.org.uk/events/event-information/2017/april/evt31630.aspx

Session 3

Trevor Williams’s presentation on the impact of Brexit on charities was welcomed by delegates, with one reporting that it was ‘very interesting, albeit sobering’.

Uncertainty around the terms of Brexit, and the possibility of reduced economic activity, which in turn will reduce charity donations and fundraising opportunities, was the overwhelming theme of the discussions that followed. Many acknowledged that the struggle to get the sector’s voice heard within Government would be made even more difficult with the political focus on Brexit negotiations.

Charities had already seen positive and negative impacts as a result of the fall in value of sterling. Some reported an uplift in domestic tourism, others a rise in the cost of overseas grants. In terms of investments however, the fall in sterling had been one of the drivers behind the FTSE 100 soaring above 7,000 and the increase in value of international investments.

One delegate wondered whether charities should take profits and redeploy funds elsewhere, but the dilemma was to where, as neither cash nor government bonds offer protection against inflation. Maybe social investment was the answer, but charities were unsure how charities should access this. One participant had experience in social investing and warned that it should be considered carefully. If a project is directly linked to a charity’s objects, it’s possibly worth considering, but it is critical to ensure you seek advice and have a clear understanding of risk versus reward.

One of the biggest concerns following UK’s decision to exit the EU was the supply of skilled labour, particularly in the medical and veterinary sectors and the rise in cost of imported goods. One educational charity voiced concern over freedom of movement for fellows and students, and the availability of EU research budgets.

Were there any silver linings? A possible relaxation of the rules of irrecoverable VAT and the wider regulatory framework were mooted, but most relented that the latter was very unlikely.

Cass Centre for Charity Effectiveness’ Director of Social Finance and Social, Mark Salway, discusses Social Investment as a way forward to create a sustainable future for charities. At a recent charity conference, the issue of local authority funding quickly came up. For this charity, it was a similar story to many others: grants disappearing, donations down and local authority funding being replaced with outcomes-based contracts. But this time, the conversation took a different turn. “We believe that we need to improve our back office, get a grip on our management information and innovate to survive. We need to focus more and […]

Cass Centre for Charity Effectiveness’ Director of Social Finance and Social, Mark Salway, discusses Social Investment as a way forward to create a sustainable future for charities.

At a recent charity conference, the issue of local authority funding quickly came up. For this charity, it was a similar story to many others: grants disappearing, donations

down and local authority funding being replaced with outcomes-based contracts. But this time, the conversation took a different turn.

“We believe that we need to improve our back office, get a grip on our management information and innovate to survive. We need to focus more and stop doing certain non-value added activities, but we believe we can create a sustainable model for our charity. We just need a little investment to get started.”

Using an intern from the Rank Foundation they had created a social enterprise model to become sustainable and were looking towards the future with hope. They were going to use some of their building space to generate external revenue, package their work as a new course they could market, potentially charge some of their existing customers for services (but they weren’t sure if this would be acceptable yet) and develop better management information systems and IT systems to grow. They had decided to focus much more closely on outcomes, and were hoping to find investment for new IT, and as seed capital to develop and market their new course. They wanted to prototype in a light touch way, and react to what they learned.

During 2015–16 we ran six seminars at Cass Business School; 150 charities took part, alongside around 20 investment organisations. The sessions were called ‘Demystifying the hype’ and the aim was to build understanding amongst nonprofits, investment organisations and charities about social investment.

We were able to understand the motivations for charities using social investment. This knowledge identified that social investment should be seen for what it is, a tool to help the sector, not a panacea for all.

The seminars identified the primary reasons why charities are interested in social investment as:

Sustainability, ensuring the ability to diversify income streams in a way that is self-sustaining and predictable

Impact, allowing charities to identify priorities and provide funding linked to these

Scaling up and growth, enabling work to be taken to scale and facilitating greater impact

Investing in IT or the low carbon economy and investing in changing business models to achieve this

Autonomy and flexibility in income streams, rather than needing to dance to the donor’s tune

Building their internal infrastructure to focus on impact measurement.

Sustainability came out very strongly as the main reason why charities were interested in social investment. Our seminar series highlighted, however, the significant need for training to develop new business models and to explain how social investment could help.

So how did the charity in the opening paragraph sense this opportunity? They did this by really understanding the needs of their beneficiaries, the outcomes they hoped to achieve and then matching this to potential income stream. They identified that their building was not fully utilised and that they had a main activity which could easily be packaged as a social enterprise. However, to take this on they needed one of the Trustees to be able to sense the opportunity, and they took the time to really think.

They also needed to wrestle with the organisational culture and identify that they needed some help to get started. They found good quality information from Good Finance website and had already started to research funders (such as Stepping Stones) to help them transform.

Charities want money that is affordable and will help them build sustainability and predictable income streams. Our recent report has showed that:

60 per cent of charities see social investment as either positively changing their business models or being transformational to them

33 per cent of charities felt that social investment would bring little or no change to their organisations

7 per cent were openly negative about it.

Our work has also highlighted that where organisations have a social investment champion, this person can help take social investment forward and help others to see the potential. It is highly correlated that those organisations where no champion exists typically do not even consider social investment.

Thinking further, it is interesting to reflect on the academic work on sustainability. A literature review on the subject would see a broad range of issues falling under sustainability: organisational capacity, financial viability, advocacy and ability to tell your story, infrastructure, and public image, for example. If you consider your charity could you guarantee sustainability of each of these areas?

To truly build sustainable charities we need to focus on strategies and avoid mission creep. Charities will need to review their work often to ensure quality services and products. Charities will also need to review their organisational purpose on a regular basis to ensure continuing relevance and clarity. Finally, charities will need to make sure that sufficient is spent on infrastructure to guarantee the delivery platform they operate from.

Looking at another example will highlight this. It comes from a charity who have been seeing their revenue stream from government contracts being taken by commercial health providers. In the short-term they are rapidly losing business. In the longer-term, the commercial organisations can’t deliver against the outcomes required and the charity then gets the contracts back at a lower price – a vicious circle.

This charity looked towards the future and identified two things they needed to be able to transform and compete. They needed to be part of a consortium to give them sufficient size and clout to compete. Secondly, they needed to update their financial department to report in a commercial profit and loss format; a simple thing but one where they lacked skills. They also needed to measure outcomes better and update their systems to achieve this. They thought that an app recording time could help them become more efficient and meet commissioners’ requirements.

They felt that to invest from their reserves would have left them with too small a level of cash to trade from, and opted for external investment instead. They found a social investor who helped provide skills on the board, and helped them to think differently.

They felt that they could only get money from a bank (as many small charities do) and found it surprising that they could get funds from a social investor who had similar motivations and objectives to themselves.

The only thing that they were worried about was the time it took to get through due diligence and prepare the material needed to secure funding – systems, processes, finances and social impact metrics. They were also worried about the ability to pay back the borrowing, but saw without this they would need to contract or merge.

They invested in their services, linked with other charities and commercial providers in the area and won a large contract. They have now increased their range and impact and have the skills to grow.

Making sustainable change is key, both for charities themselves and the communities they serve. Being the right size organisation is important, and this may mean steady growth using the right financial tools and models. We need vibrant, entrepreneurial charities and nonprofits to re-invigorate the sector; we need charities at all points on the size scale if demand is to be met.

Charities typically want to help beneficiaries in every way they can, but often this leads to them not being able to stop doing activities, at worst it means that they stray far from their original charitable objectives. This becomes a further drain on resource. We need to prioritise ruthlessly.

All this learning and more is included in a report on social investment, “Social Investment: as a new charity finance tool, using both head and heart” published by Cass Business School and free to download. We have also published a simple toolkit to help people learn and see if social investment could be a useful tool for them.

So how are you going to develop your organisation for the future? Who is your social investment champion? What changes do you need to make to create momentum to take you on a new journey? Maybe, just maybe, social investment could help you on that journey.

Now that it has been a week since the Chancellor submitted his Autumn Budget, CFG has been able to take a finer look at what the document says on business rates. One positive outcome that we have not previously reported on is a change to the “staircase tax”. In 2015 the Supreme Court ruled on redefining single business space and meant that the government’s Valuation Office Agency (VOA) could allocate different business rates for individual floors and workspaces that are only linked by public areas. Offices which had one office linked by a communal lift, corridors or stairs were being […]

Now that it has been a week since the Chancellor submitted his Autumn Budget, CFG has been able to take a finer look at what the document says on business rates.

One positive outcome that we have not previously reported on is a change to the “staircase tax”. In 2015 the Supreme Court ruled on redefining single business space and meant that the government’s Valuation Office Agency (VOA) could allocate different business rates for individual floors and workspaces that are only linked by public areas. Offices which had one office linked by a communal lift, corridors or stairs were being charged as separate offices, even if all the rooms were part of one business. This has been duped the “staircase tax” and is predicted by the Federation of Small Businesses (FSB) to affect 80,000 properties across the UK.

So what does the Budget say and do?

The Budget states:

“legislating retrospectively to address the so-called “staircase tax”. Affected businesses will be able to ask the Valuation Office Agency (VOA) to recalculate valuations so that bills are based on previous practice backdated to April 2010 – including those who lost Small Business Rate Relief as a result of the Court judgement. The government will publish draft legislation shortly”.

This is good news and will mean that charities that have been affected by the 2015 ruling could see a significant decrease in their business rates bills.

Another key announcement

The Budget on business rates is the increasing frequency that the VOA will use to revalue non-domestic properties. The revaluations will begin every three years, with the next one currently due in 2022. However, this could result in an administrative burden for charities as they will have to be responsible for proving regulation information to the VOA, including property characteristics, use and rent. The government says in the Budget that they will be launching a consultation on this in spring 2018.

It’s important that the government is addressing business rates, though CFG is still concerned that there has been no confirmation of a 100% business rate relief for all charities. CFG has predicted that the charity sector’s expenditure on business rates could hit over £400m by 2020.

In the midst of all the noise around the Budget, a significant change to the Gift Aid rules has been proposed. The proposal appears straight forward on the face of it with the three threshold limits for what can be given as a “thank you” to donors being cut down to two. The current limit of a thank you being worth only 25% of the total value of the donation for the first £100 will remain. But for donations over £100 – charities will be able to give 5% for the part of the donation that exceeds £100. This is […]

In the midst of all the noise around the Budget, a significant change to the Gift Aid rules has been proposed.

The proposal appears straight forward on the face of it with the three threshold limits for what can be given as a “thank you” to donors being cut down to two.

The current limit of a thank you being worth only 25% of the total value of the donation for the first £100 will remain.

But for donations over £100 – charities will be able to give 5% for the part of the donation that exceeds £100. This is in addition to the 25% for the part of the donation that was under £100.

Is the new system really simpler?

I’ve had the pleasure over my time at CFG to give many training sessions on Gift Aid to charities both large and small. I am not convinced that this system is going to be simpler for most charities in the long run, as it is going to potentially require them to use two thresholds simultaneously, rather than one at a time (which is a lot easier to explain and remember).

If you have software that can help with the calculation, or a lot of experience in fundraising, then I think that this will be helpful as it will avoid the cliff-edge that the current system brings into effect. However, for the smaller charities, getting their heads around this new system is going to require a great deal of communication and it is going to lead to an increase in error as people either forget that the 5% only applies to part of the donation, rather than the whole thing.

CFG will work closely with the government to ensure that there is effective communications behind this. Fortunately, we have till February 2019 for charities to upgrade their software and educate their staff.

Avoiding the bigger issues

As the average donation amount is £45 the changes in thresholds are not going to help the vast majority of donations although charities will have to learn the new thresholds, which will cost time to teach staff and volunteers to understand.

We’ll have to wait and see what the full consultation response on the 1st December 2017 says about the other proposals put forward, but I am not alone in being disappointed that the government has referenced other proposals such as introducing a low value disregard list for “thank yous” which would not count towards donor benefit limits. When we surveyed charities, 78% said that this would be useful as a way to make administration easier and to avoid using complex thresholds altogether. A simple list that HMRC could verify would free up a lot of time, particularly for small charities that don’t want to waste time calculating what the value of thank yous are.

This bring us onto the biggest issue that charities encounter around donor benefits which is the so called “value test” where charities have to value benefits by what they are worth to the donor, rather than what they cost the charity to purchase. This can be very confusing when you are dealing with items such as “behind the scenes access” to a play being put on by a local theatre company or a free piece of artwork from a service user of the charity, which is not commercially sold.

Changing the thresholds without addressing the types of benefits that could be provided or is not likely to make the whole system easier for small charities.

Do we need the rules at all?

The more and more that I have thought about these rules, the more I have questioned whether there is a need for the rules at all.

The rules are already quite clear that if you give a donation in return for a good or service, then that isn’t permitted. 3.4.5 states:

“Payments to a charity in return for services, rights or goods aren’t gifts to charity”

So if people are giving money just to get something in return, then this shouldn’t be counted as a Gift Aid donation at all.

However, a lot of the rules appear to be HMRC legislating for fundraising which it doesn’t have a clear understanding of and which doesn’t fit neatly into little boxes. In the Donor Benefits consultation it was pretty clear that there are hundreds of different business models and approaches to fundraising, no set of rules are going to be able to keep up with that. And why should it?

There needs to be more trust in the way that Gift Aid is administered. Ultimately, if charities are stupid enough to give a £15 “thank you” for a £20 donation, they are going to be out of business pretty quickly. If it helps to build up their fundraising base over time and create loyal donors, then who cares?

Moreover, at the moment there is a lot more error created because charities don’t properly understand the rules and because there is a lot of grey areas in terms of implementation.

What would be really bold is if the government looked at this whole element of regulation and made a case for why it is needed, what is it trying to stop from happening and are the current rules the most effective way of achieving that?

This might lead to more radical proposals that really would simplify the system for charities.

New rules in practice

What will the new rules mean on donations in practice, here are some examples of how the new benefit thresholds will work:

The Budget is out, the CFG Budget Briefing for charities is available to download from our website, the dust appears to have settled pretty quickly on this Budget. But what does the wider economic picture mean for charities? As usual, the Office for Budget Responsibility has produced its forecasts for how the economy will perform and the impact on the public purse. This data is useful for charities for planning financially and make decisions. The document is free to download, but here is a quick analysis of some of the more interesting numbers for charities. It’s going to be a […]

The Budget is out, the CFG Budget Briefing for charities is available to download from our website, the dust appears to have settled pretty quickly on this Budget. But what does the wider economic picture mean for charities?

As usual, the Office for Budget Responsibility has produced its forecasts for how the economy will perform and the impact on the public purse. This data is useful for charities for planning financially and make decisions. The document is free to download, but here is a quick analysis of some of the more interesting numbers for charities.

It’s going to be a tough few years

Unsurprisingly, given the headlines this morning about the Chancellor failing to “lift the gloom”, the medium term numbers are not great.

GDP has been revised down substantially for pretty much every year over the next five years. Rather than growing between 2-2.5% a year, we are now likely to grow only 1-1.5% for the rest of the Parliament. This isn’t about Brexit necessarily, but because after several overoptimistic forecasts about productivity, the OBR has finally called time and said that we have to get used to the fact that the UK is not going to produce as much as it used to before the financial crash.

Fundraising climate is not welcoming

Higher inflation means that average earnings are not going to grow as strong as they were predicted to back in March. Rather than earnings rising by around 3-4% per year, it is now predicated that earnings will only rise by around 2-3% a year. This might not sound like very much but it is a big difference. The cumulative impact is also significant.

All this means that real household disposable income, the money that is left in your pocket after taxes and rents etc., is not going to grow stronger (as the red boxed area below shows).

Interestingly, a lot of the growth is made up by dividend income and it will be interesting to see whether any wider economic instability caused by Brexit will have any impact on these figures. It also highlights how fragile household incomes are.

Given how income from individuals is for our sector (around 45% of all our income is through fundraising and income earned from individuals) this is not good news. Revising fundraising targets and the rate of return for fundraising expenditure would be advised.

The OBR’s forecast for consumer spending growth over the Parliament is also significantly lower than in March, with cumulative growth between the first quarter of 2017 and first quarter of 2022 down from 7.7 per cent in March to 6.2 per cent in this forecast. This may have a positive impact on charity shops which tend to do better when people have less money but are still looking to spend.

What is going on with public spending?

He might not have said anything, but actually, the Chancellor loosened the purse strings again in this Budget. Government spending (not on buildings but on services) is going to go up by £7.5bn over the Parliament, compared to what he had planned in March. This is due to a combination of giveaways in the Budget to the NHS but also due to predicted increases in public sector pay. At least half of this amount is going to go away in pay, but this loosening will be welcomed by charities which are delivering services in the public sector.

I am always interested to know what is happening at the local level, because that is where many charities have financial relationships. Once again, local authorities are spending more than they were expected to do so. They have spent nearly £3bn more this year than was expected, although much of that was borrowing. They are also spending down their reserves after several years of prediction that this would happen. This is good and bad news, good news that they are spending them and keeping services funded, bad news that the financial situation has forced them to do so.

The OBR has also broken down where the overspending and underspending is taking place at a local level, which gives an interesting insight into councils spending. Children’s social care (which Children England have highlighted in their work recently) and adult social care are unsurprisingly overspending due to a lack of government investment. The environment, transport and cultural services appear to be bearing the brunt. As these are discretionary, this isn’t surprisingly. The OBR is particularly concerned about children’s social care spending and whether this will impact the quality of services.

Overall, local councils are expected to spend £4.4bn more over the next few years, likely to be concentrated on care services. For charities that are working with local authorities, this is likely to be diverted to core statutory services. But drawing down on reserves and more borrowing may delay cuts in other non-statutory services for a few more years.

There is a bite in the tail for central government spending, however. In order to meet his deficit target, the Chancellor has booked in £4.7bn in cuts in 2022-23. Will these be delivered? Where will the axe fall? This is far in the future at the moment, but this indicates how changeable the public spending landscape is. As this is would be at the start of the new Parliament, the Chancellor is leaving a nasty surprise for whoever the next government is.

The OBR has also estimated that the government will have £2.1bn in additional funds to spend after leaving the European Union, although that disappears in 2021-22. Is this because the government is not planning to continue propping up those services or because no decisions have been made? It is assumed that this spending is merely continuing existing EU projects, but charities need to make sure that some of this new funding comes their way.

On Wednesday 22nd November at 12:30pm the Chancellor, Philip Hammond, will deliver the first Budget since the General Election in June. If you can’t tune into the Chancellor’s speech, then do follow this blog for key announcements and early analysis of how they will impact on the charity sector. Also keep an eye on the following twitter accounts: @CFG_OBrien; @CFG_McLoughlin. 17.35 – HM We’ll be publishing CFG’s Autumn Statement briefing so keep an eye on that for more in-depth analysis (and some tidbits hidden in the the Treasury and OBR documents). 17.30 – HM Budget response from Buzzacott “We were first excited to hear of the long-awaited […]

We’ll be publishing CFG’s Autumn Statement briefing so keep an eye on that for more in-depth analysis (and some tidbits hidden in the the Treasury and OBR documents).

17.30 – HM

Budget response from Buzzacott

“We were first excited to hear of the long-awaited Simplification to Gift Aid donor benefit rules but when we read on were disappointed that the government had only announced a withdrawal of one of the thresholds. There appeared to be winners and losers from this single change but we have since been told that this is a step or “splicing” change . Hence this should be good news or no change for most. The limited £25 value of donor benefits for (“as a consequence of”) donations of £100 – £1,000 will no longer apply from 6 April 2019 and swept up within the 5% benefit limit currently applying to donations over £1,000. It appears good news for some higher-level supporter schemes which will no longer be restricted to the £25. For example, in the arts sector there are often Patron supporter schemes paying between £400 and £1,000. The value of benefits permissible under Gift Aid to these supporters for free exhibitions etc. will now increase.” LukeSavvas,Partner

15:50 – KB

Budget response from Sayer Vincent

Gift Aid donor benefit rules

As announced at Autumn Budget 2017, the government will legislate in ‘Finance Bill 2018-19’ to simplify the donor benefit rules that apply to charities that claim Gift Aid tax relief on donations. Currently there are a mix of monetary and percentage thresholds that charities have to consider when determining the value of benefit they can give to their donors in consequence of a donation on which Gift Aid can be claimed.

These will be replaced by two percentage thresholds:

the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation

for larger donations, charities will be able to offer an additional benefit to donors up to 5% of the amount of the donation that exceeds £100

The total value of the benefit that a donor will be able to receive remains at £2,500. Four extra statutory concessions that currently operate in relation to the donor benefit rules will also be brought into legislation.

A summary of responses to a consultation on simplifying the Gift Aid donor benefit rules will be published on 1 December 2017.

The changes will have effect on and after 6 April 2019.

Helen Elliott, Sayer Vincent commented:

“We have been awaiting the outcome to the donor benefit consultation for some time now. The good news is there is a long lead time before implementation and this is better for donations of between £500 and £1,000. But the bad news is that the benefits permitted between £100 and £500 drop from £25 to just 5% of the donation – so between £5 and £25.”

VAT registration threshold

In response to the Office of Tax Simplification’s report Value Added Tax: Routes to Simplification, the government will consult on the design of the threshold, and in the meantime will maintain it at the current level of £85,000 for two years from April 2018.

Helen Elliott commented:

“There had been rumours that the threshold would be dropped to half or even a quarter of the current level so that many more small businesses were required to register this is a relief as a it would have had a huge administrative burden on many charities not currently registered for VAT.”

15:35 – KB

Response from Waverton Investment Management

“The budget has confirmed that almost three quarters of a billion pounds in LIBOR fines have been distributed to support certain areas of the charity sector. Whilst a further £36m has been committed over the next three years, this will be the last set of payments, potentially leaving some organisations looking for alternative funding streams at a time of continued pressure on household incomes.” James Pike, Head of Charities.

15:30 – KB

Budget response from Ecclesiastical

David Britton, Ecclesiastical’s charity director, said:

“It’s good news for charities that there will be no further IPT increases following today’s Budget announcement.

“Buying insurance is an unavoidable cost for charities; either because they are legally required to, or because they are acting responsibly by putting adequate protection in place for their activities and assets. The doubling of IPT in the past two years up to 12% has been very hard to take for charities and any further increases would have been devastating.

“We will continue to work hard alongside the Charity Finance Group (CFG) to raise awareness of the negative impact of IPT on the work that charities do and to urge the Government to consider an exemption or reduction for third sector organisations.”

15:20 – KB

And a final response from haysmacintyre:

“Business rates remain a burden to the charitable sector, despite existing reliefs available to charities. Today’s announcement that business rate rises will be linked to the lower CPI measure of inflation from April 2018, much earlier than planned, should come as welcome news to the sector.” Louise Veragoo, NFP Tax Director.

Budget responses from Kingston Smith LLP

“Following consultation, the Government will simplify the Donor Benefit rules to create two percentage limits to apply from April 2019:

The benefit limit applying to the first £100 of any donation remains unchanged – 25% of the amount of the donation

For larger donations, charities will be able to offer an additional benefit to donors – up to 5% of the amount of the donation in excess of £100

The total value of the benefit that a donor will be able to receive will remain at £2,500.”

From Kingston Smith LLP:

“This change increases the benefits that may be provided in relation to donations over £100. A donor of £1,000, for example, may now receive a benefit valued at £70 without compromising the Gift Aid status – previously the limit applying would be £25.

“Those in the NFP sector may not relish the need to get used to a new set of rules, but overall we expect that they will welcome this simplification, which will remove a previous ‘cliff-edge’.”

15:10 – KB

Budget response from Access Insurance

No mention of Insurance Premium Tax increase which is good news for charities as the sector has been hit hard by increases over the last couple of years. However the government have not announced an IPT tax cut or relief for charities.

Three new pilot schemes and a £28m fund have been announced with a view to ending homelessness by 2027. Is this enough? Many of our homelessness charity customers have been doing incredible jobs on shoestring budgets and still rough sleeping numbers are rising. We hope the Government will consult charities who have experience in this area, including Homeless Link, the sector’s representative body. Provision of housing alone will not solve the complex problem of rough sleeping and the Government need to do ensure they are listening to experts and understanding the problems fully, before they roll out solutions.

15:05 – KB

Budget response from Standard Life Wealth

“With four mentions of the word “charities” in the Budget document, this was not a big Budget for charities, although several announcements will impact the sector. For example, the Budget included an increase to the national minimum wage, a new duty to be levied on certain cider to target excessive consumption by vulnerable individuals, and funding to modernise the poppy factories in Richmond and Edinburgh. The completion of the LIBOR Charity Funding Scheme was also announced, with a further £36 million of banking fines to be shared out over the next 3 years among armed forces, emergency services and other charities.” Julie Hutchison, Charities Specialist at Standard Life Wealth.

14.55 – KB

Budget response to the changes to Gift Aid donor benefit rules from haysmacintyre

“Although the detail is yet to be published, we are pleased to learn that an end is in sight for the Gift Aid donor benefit review. Although not unexpected, it has been confirmed that the current three monetary thresholds will be reduced to two and all the extra-statutory concessions will be legislated, with changes coming into effect from April 2019. This should end the long-running uncertainty around these rules and we hope that charities will be given enough guidance and time to make any changes that might be necessary.” Louise Veragoo, NFP Tax Director.

14.45 – KB

Budget response to the Apprenticeship Levy from haysmacinytyre

“With their large volunteer workforce, charities continue to campaign for more opportunities to make use of the payments they make into their Apprenticeship Levy account. Today’s announcement that the government will “keep under review the flexibility that levy payers have to spend this money” will hopefully keep this dialogue open and give charities a chance to argue their case for spending more of these funds.” Louise Veragoo. NFP Tax Director.

More on the Apprenticeship Levy in our full Budget briefing paper which will be published later this afternoon

14.16 – HM

A final word from Caron Bradshaw, CEO of Charity Finance Group

“For a government looking to the future it was disheartening to only hear references to business and physical infrastructure. This is backward looking, because our future prosperity comes from having strong communities which charities help to create. Bricks and mortar is fine, but real growth comes from sustainable communities where people want to live.

We need to put our role at the centre of the economy and society in front of politicians, so that public investment benefits everyone. It is too early to say whether Gift Aid Donor Benefit Rule changes will help or hinder the sector, and we’ll need to read the fine detail closely.”

13.43 – HM

So quite a few items on CFG’s #charitybudget bingo has not been covered (targeted charity giveaway, Charity Commission funding) so it’s now time to head into a deep dive into the Treasury and OBR’s papers.

13.41 – HM

Now that Hammond has sat down, CFG’s Caron Bradshaw and Andrew O’Brien will be taking part in a quick Periscope where they’ll be discussing the key points for charities from the budget. Head on over to CFG’s tweets to make sure you do not miss it.

13.41 – HM

Councils will also be able to charge a 100% premium on council tax on empty properties. This is being combined with an established task-force to eliminate homelessness and rough sleeping by 2027.

13.37 – HM

HOUSING

£44bn for housing over the next 5 years, with 300,000 more homes being built every year. £34m to develop construction skills

Solving the housing challenge takes more than money, takes planning reform. Will focus on the urban areas where most people want to live and where jobs are and will protect greenbelt.

Will put the needs of young people and will make sure that the council priorities first time buyers and young renters. The highest level since 1970s.

Stamp duty will be abolished for first time buyers and/or where the house is under £300,000.

Are the large announcements on housing and Help to Buy because the Conservatives are scared of how strong young (mostly Labour voters) feel on housing?

13.29 – HM

NHS

This is an area that has faced continued public pressure since the GE in June 2017.

Hammond announces an extra £10bn for the NHS immediately to capital investment for front line services. Outside of the spending review, Hammond has pledged making an additional resource funding commitment of £2,.8bn to the NHS England. This means £350m for this winter, and the rest will be given in 2018/19.

Hammond does not commit to extra funding for NHS workers pay, but promises that if a review recommends this then he will do in the future.

13.25 – HM

VAT registration threshold remains unchanged.

Hammond has committed to keeping point that small businesses pay VAT for the next two years. Currently the rate sits at £85,000, which is a lot higher than the rest of the EU.

13.22 – HM

Hammond addresses the concern around the introduction of Universal Credit (UC). He states various changes:

Removed the 7 day waiting period at the beginning of a claim so entitlement will start on the first day of the claim.

Will change the advancement system so any household can access a month advancement within 5 days, and will be able to do so online.

And anyone with housing benefit will continue to receive 2 weeks when switching to UC.

This will be good news for charities who work with beneficiaries who have been impacted by the changes to UC.

13.20 – HM

The National Living Wage, from April, will rise by 4.4%, from £7.50 an hour to £7.83. This should give full-time workers a further £600 pay increase.

13.17 – HM

Increase in Personal Allowance to £11,850, charities need to make sure that they check donors are still paying tax for Gift Aid more complex tax picture.

13.15 – HM

Wales will get £1.2bn more in funding. With Scotland receiving £2bn and Northern Ireland £650m. This could be good news for charities in Wales and the other devolved nations.

13.12 – HM

100% Business Rates Retention Pilot in London. This isn’t being dropped, but perhaps means it will be delayed nationally? Supposed to be in place by 2020. Charities worried about financial impact on local authorities

13.10 – HM

Hammond has announced the support for further education in Maths beyond GCSEs.

Could this mean a new generation of charity finance directors are being created!?

13.06 – HM

Hammond states that £500m will be invested into the tech sector, from fiber broadband to developing 5G infrastructure. This will be good news for charities in rural areas.

The Chancellor also announces a new Geospatial Data Commission to develop a strategy for organisations to use the government’s location data to support economic growth.

£20bn has also been promised as investment help UK tech businesses to scale up. There appears to be no reason why this wouldn’t be invested in charities who work in the tech sector as well.

13.00 – HM

Increase and extension of the National Productivity Fund to be £31bn. Already the government has provided an additional £23bn of investment, over a 5 year period, to the UK’s infrastructure. This means that Chancellor is going for traditional bricks and mortar investment approach, not social infrastructure – mean less discretion to fund public services.

12.58 – HM

OBR has revised down the forecast for GDP to 1.5% in 2017, 1.4% in 2018, 1.3% in 2019-20.

However, GDP is expected to rise to 1.5% in 2021 and 1.6% in 2022.

12.55 – HM

Hammond has expanded on debt peaking, with the Office of Budget Responsibility (OBR) expects debt to peak this year, and then gradually fall as a share of GDP.

12.53 – HM

Tick of UK productivity on your bingo cards!

This has long been an area of concern. Hammond says that the last 16 fiscal cycles have seen no increase of productivity to 2%, which is the standard the OBR uses to be confident the UK economy is ‘strong and stable’.

This means the economy is expected to slow for next three years and is a downgrade from the predicted 2% growth stated at the Spring Budget in March 2017.

12.47 – HM

Hammond says that the government needs maintain fiscal responsibility while ‘debt is, at last, peaking’. That’s a very politician way of saying that the UK’s debt has significant risen the financial crisis in 2007.

Many charities, will of course, be aware how the increase in the UK’s debt and the Conservatives determination to cut this has impacted on their funding.

12.44 – HM

After discussing Brexit, Hammond has moved straight onto the UK’s potential future role in technology, whether that comes from universities or factory floors. He says this is an area that the UK needs to invest in.

This could be good news for charities who rely on cutting edge technology, especially in the medical sector.

12.41 – HM

Over £700m has been invested in Brexit so far, and Hammond has pledged a further £3bn for Brexit, if and when it’s needed.

12.40 – HM

Hammonds started with a tough fighting stance for the new future of the UK’s economy. Brexit is one of the first points that has been mentioned (not sure how Hammond could have avoided it!).

Is this Budget going to be the soothing statement the City and UK businesses are calling out for?

12.32 – HM

We’re reaching the end of PMQ’s. Now’s the time to get another cup of tea/eat a quick sandwich!

22/11/17 – 12.00 – HM

The most boring budget in recent memory?

We’re just under an hour away from Hammond taking to the dispatch box to release his budget and already rumours are circulating about what is in the budget. Some commentators are describing it as the most boring budget in recent memory, with the Chancellor being given very little room to manoeuvre on any large scale, headline grabbing policies.

Andrew has already mentioned the reports of announcements of the NHS receiving additional funding and more money for social care. It appears that housing might also be a large issue that the budget will try and cover. Any announcements on housings, and by extension what this could mean for Local Authorities funding and spending, will be scrutinized by charities that either work around housing, or with beneficiaries who are affected by the housing crisis.

While we haven’t included this on our budget bingo card it’ll be interesting to predict what, if any, policy announcement will be subjected to a U-turn over the next few weeks. Both Hammond’s Spring Budget in March 2017 and Osborne’s Autumn Statement in November 2016 resulted in embarrassing U-turns by the government on key policy issues. With the Conservatives having no majority, and with increasingly hostile debates around austerity (highlighted by Andrew below) and Brexit within Conservative backbenchers, it might be an unfortunate third time unlucky for Hammond.

22/11/17 – 11.41 – HM

#charitybudget Bingo

We’ve once again given the people what they truly want, another CFG BUDGET BINGO CARD! Download yours and let us know how you have gotten along at @cfgtweets.

22/11/17 – 11.19 – AOB

End of austerity?

For many years we have heard repeatedly that there is no money and that we had to get used to cuts. Although there are still plenty of cuts to come, particularly for local government, it appears the broad front on reducing public spending and squeezing pay is due to come to an end. All the parties went into the election saying that they would spend more whether on public services or pay (or both!).

There are reports this morning that the NHS will receive an additional few billion and that more money will be pumped into social care. Schools are going to receive more money to help boost maths education. The public sector pay cap looks like it is going to be junked for nurses at least, and maybe teachers as well. What does this mean for charities?

Shallower spending reductions will certainly help charities that work to deliver public services but a looser pay cap may, as many charities try to match developments in the public sector, led to increased staffing costs for charities.

For the charity sector as a whole, the real test of whether austerity is ending will be at a local level. Will the Chancellor finally allow above inflation increases in Council Tax? Will additional funding be given on social care so that pressure can be taken off other areas? Loosening the purse strings on local government, which accounts for around half of all UK government income, would be the biggest boon to charities, particularly the smallest organisations.

22/11/17 – 10.06 – AOB

What do the morning papers say about the Budget?

A quick review of the morning papers makes for interesting reading.

On the positive side, the government is likely to see borrowing for this year fall by between £6-8bn more than it forecast in March – this will give the Chancellor some room to make giveaways today. However, lower productivity growth and concerns about Brexit mean that, according to the FT, borrowing in 2020-21 will have increased by £10bn. This means that the Chancellor’s wiggle room of £26bn in the last year of the Budget forecast (which he could have used for more tax cuts or spending) will now fall to £13bn. This isn’t as much money as it may sound, and means that the Chancellor will probably want to be cautious about spending commitments in this budget.

Apart from a rush announcement on schools (despite the Treasury saying yesterday that there would be no policy announcements before the Budget), there is very little in the Budget. This could all be good expectations management or it could indicate that a lack of a majority and the focus on Brexit has led to very little new thinking in No.11.

One thing which has cropped up in a few news sources is the idea that Hammond will bring forward increases in the personal allowance to £12,500 from 2020-21 to this year. This will cost him money now, but if he freezes the threshold for the rest of the Parliament, he will claw back some of that money by the end due to inflation. For charities, a quicker increase will further erode the pool of donors that are eligible for Gift Aid, but if it boosts disposable incomes for the population as a whole, could lead to a more positive picture for fundraising.

Remember, you can keep following all CFG’s work on the Budget via the hashtag #charitybudget

22/11/17 – 9.34 – HM

What can charities expect from the budget?

On the morning of Budget day, we know that charities are wondering what they can expect from Hammond’s Autumn Budget. Being described as a ‘make or break’ Budget for Hammond, today will be a big test of how the government think the economy is doing. Is it really strong and stable, or weak and wobbly?

CFG’s Andrew O’Brien has written a blog post on what charities can expect from this years budget. Read all of Andrew’s analysis on likely tax increases for charities and whether austerity is ending here.

]]>http://blog.cfg.org.uk/index.php/live-blog-autumn-budget-2017/feed/0Investing in financial governance is one of the most cost effective ways to help your charityhttp://blog.cfg.org.uk/index.php/financialgovernance/
http://blog.cfg.org.uk/index.php/financialgovernance/#commentsFri, 17 Nov 2017 10:15:34 +0000http://blog.cfg.org.uk/?p=2901

As we come to the end of Trustees Week 2017, Charity Finance Group has had a busy week. Yesterday, one of our Member Meetings was focused on how to improve governance and explaining the new Charity Governance Code. At the start of the week we launched the findings of a survey that we carried out with MHA MacIntyre Hudson into financial governance. Today, we launch a new free guide for trustees of charities on finance issues, sponsored by MHA MacIntyre Hudson, alongside a glossary of key charity finance terms. Why is financial governance so important? It might seem an obvious […]

As we come to the end of Trustees Week 2017, Charity Finance Group has had a busy week. Yesterday, one of our Member Meetings was focused on how to improve governance and explaining the new Charity Governance Code.

At the start of the week we launched the findings of a survey that we carried out with MHA MacIntyre Hudson into financial governance.

Why is financial governance so important?

It might seem an obvious point to make given the tough financial environment that many charities are operating in, but financial governance is very important to the success of a charity.

Trustees have a critical role to play not just in setting the overall direction of the charity, but also in overseeing the financial strategy of the organisation. At a charity seminar, hosted by Quilter Cheviot in Manchester yesterday, I was privileged to listen to James Brooke-Turner, Finance Director of the Nuffield Foundation, speak about the importance of governance. His point was that when times are challenging, and the future is uncertain, the effectiveness of the board is incredibly important. The decisions that trustees make, if they are not thought through properly, can have a significant long term impact on the financial health of the organisation.

At difficult times boards may be tempted to make rash decisions or hide away from the big issues. Charities need to have the right structures so that that information can be gathered and informed decision making can take place.

Executive teams cannot do this on their own, they need to bring their boards with them.

Investment in governance is critical

Another point that James made was that governance is often one of the cheapest things to invest in yet it often has the biggest returns. A good board will better be able to handle risk, and with the ability to handle financial risk comes the chance for opportunities and growth. The Quilter Cheviot seminar I attended yesterday, for example, was free. CFG’s new guide is free. There are many resources out there for charities that are free or low cost.

However, sometimes, investment in training and external support is required – particularly in areas such as finance which can be complex. Getting the right induction process so that trustees have the necessary skills and understanding is critical. This is also something that needs to be shared across the whole board and not just concentrated in a few areas.

The Charity Commission’s latest research on trusteeship has really brought home how much boards are depending on a few key individuals such as the Chair and Treasurer. Ultimately boards need to take decisions collectively, and this means that all trustees should be informed decision makers.

CFG and MHA MacIntyre Hudson have provided trustee training on finance in the past and we will do so again. But every charity should be checking that their board is up to the required level.

Our trustee survey found that 49% of respondents never or only occasionally provided charity finance training for trustees. We’ve got to reduce that figure over the years ahead, otherwise, we will have a big skills gap on our boards.

Start with assessment

The first place to start is by assessing the competence of the board. What skills do you have? What understanding is there? Our new guide is a useful place to start. Do all trustees understand the core responsibilities outlined in the guide and do they know how they can make a contribution?

If not, then some form of training or support is probably in order. The guide also a handy matrix which you can use for your trustees on what financial skills they have. Some trustees may not have formal charity knowledge, but they may have other finance skills. Not only does this help to identify gaps, but it can also boost confidence in those trustees that perhaps do not have traditional charity finance experience. Everyone should feel empowered to have a say on finance.

Don’t let things slide

In discussing the new Charity Governance Code with members yesterday, one of the things that came through is the need for charities to not let things slide. We need to be having constructive challenge about board performance both from executive teams but also, and more importantly, from trustees themselves.

If you are going to make one pledge this Trustees Week, it should be to go away and bring these issues up at your next board meeting. Now is the time to take action and hopefully by next Trustees Week, both your charity and the sector will be in a stronger position.

It’s that time of the year again when the newspapers are full of gossip about potential giveaways or shocking tax changes which are going to cost eye-watering sums of money. Over recent years, charities have got used to Budgets being “missed opportunities” and passing by without much of an impact. But we cannot be complacent as charities. Tax reliefs for charities are worth billions every year and over 1/3 of our income comes from government. Simply put, what the Chancellor says matters. So what we can expect from the Autumn Budget? Tax increases likely The Chancellor is under pressure to […]

It’s that time of the year again when the newspapers are full of gossip about potential giveaways or shocking tax changes which are going to cost eye-watering sums of money. Over recent years, charities have got used to Budgets being “missed opportunities” and passing by without much of an impact. But we cannot be complacent as charities.

Tax reliefs for charities are worth billions every year and over 1/3 of our income comes from government. Simply put, what the Chancellor says matters.

So what we can expect from the Autumn Budget?

Tax increases likely

The Chancellor is under pressure to fund various initiatives. He has also committed himself to eliminating the deficit by 2025, and he doesn’t look likely to back track on that. The biggest story of the day will probably be the Office for Budget Responsibility’s forecast on how quickly the economy will grow in the years ahead. If poor productivity and Brexit are deemed to have damaged long term growth, the Chancellor may lose the headroom he had previously built into his previous Budgets.

All this means that attention will turn on revenue raising. One area where the government has already showed an interest in increasing revenues is the Insurance Premium Tax. This has doubled in recent years and is now costing charities an extra £25m a year. The Chancellor has said that he wants to bring IPT in line with VAT rates which would mean increasing it from 12.5% to 20%. This would add an extra £20m to the bill. Overall, this would leave charities paying around £80m a year in IPT. This is going to particularly impact the smallest charities who generally pay a greater proportion of their income on insurance than the largest charities. It is also a cost that few can avoid because insurance is usually required by law or regulation.

In recent days there has even been a story flying around that income tax may be increased in order to pay for public services. I find this hard to believe, but if it was to increase this could be good and bad for the sector. Good in one sense because the value of Gift Aid repayments would increase. Bad for charities, because it could put pressure on donors and increase wage demands from staff.

Another charity specific measure that could be announced is changes to the Gift Aid Donor Benefit rules. The government ran a consultation some time ago on changes to help the charity sector, and so far there has been radio silence from government. Perhaps the Red Book will include some further information on this?

All parties promised to review the business rates system (again) at the last General Election. A review into VAT reliefs has recently been proposed by the Office of Tax Simplification, but could we see another review into business rates announced? This would certainly appease the business lobby. For charities, it could be good or bad. Leaning to the positive side, as the case for protecting charity rate relief has only been recently accepted by government, could this be a chance to finally get 100% business rate relief for charities?

The end of austerity?

After the election, I wrote for the CFG blog that we may be seeing the end of austerity. All the political parties had to some extent committed to more public spending in the election campaigns. In the Conservative Party, the consensus appears to be that the public had enough of cuts and pay restraint. It seems inevitable that this Budget will see a loosening of purse strings for areas such as social care, housing and the NHS. For charities working in these sectors, this will be a welcome relief.

However, the key issue for most charities is what happens to local authority spending. On housing, there appears to be a consensus that borrowing caps should be loosened for local authorities. But on day to day spending, the picture appears bleak. More funding for social care would certainly help local authorities, with the LGA estimating that there will be a £5.8bn overall funding gap for councils by 2019/20. Will government give councils the chance to raise council tax to close this gap and ease the cuts?

Although not directly relevant for charities, changes to public sector pay will have an impact on the sector. Many charities are competing with the public sector for staff and awards to their staff will have an impact on pay settlements in the charity sector. One of the few areas of expenditure which haven’t risen significantly in recent years has been pay, so a return to “normal” levels of pay increases could add further pressure to charity budgets.

Keep informed

Whatever happens on the day, you can follow analysis of the Budget via Charity Finance Group’s Live Blog and the twitter hashtag #charitybudget. CFG will also be producing a free briefing for charities on the Budget, which will be available on Wednesday evening.

Sarah Atkinson, Director of Policy and Communications at the Charity Commission explains why all charities should take part in their consultation on the Annual Return. The Charity Commission is running a consultation for next year’s annual return, which includes key financial and other information that we as a regulator collect about charities – and this is your opportunity to help shape the future of this collection. We are reviewing the key information that we collect and display from charities, the changes we’re proposing are the most significant since 2013 and are intended to reduce the amount of information that smaller […]

Sarah Atkinson, Director of Policy and Communications at the Charity Commission explains why all charities should take part in their consultation on the Annual Return.

The Charity Commission is running a consultation for next year’s annual return, which includes key financial and other information that we as a regulator collect about charities – and this is your opportunity to help shape the future of this collection.

We are reviewing the key information that we collect and display from charities, the changes we’re proposing are the most significant since 2013 and are intended to reduce the amount of information that smaller charities have to supply each year and target more detailed questions tailored to each charity. This is your opportunity to have your say on this next iteration.

The annual return is a key regulatory tool that is used for two main purposes; it enables the Commission to collect information about charities that it can use to identify issues of concern, either in specific charities or areas of broader risk across the charity sector. It is also the source of much of the information that is displayed on the Register of Charities – a key driver to allow the public and donors to find out more information about charities.

Our intention is to shift to a more dynamic annual return, that is better targeted and easier for charities to use – those charities that are smaller and have more simple operating structures will answer fewer questions, whereas those that are larger and more complex will be required to answer more. These changes will help ensure that the questions reflect the priority risk areas and help us tackle new regulatory risks as they emerge, we also hope they will strengthen the sector’s accountability and provide information that the public and others expect to be able to see.

For each new question we’ve considered how the information will help meet a regulatory aim however, we’re also mindful of not to creating an additional burden on charities.

Ensuring we collect the right information, in a way that is simple for charities to understand, is absolutely vital. Whilst this information is an essential regulatory tool for the Commission, this is also the main way that the charity register is populated – and with almost 12 million views of the public register per year, and many organisations across the sector relying on its accurate data – this is an essential tool for more than just the regulator.

We believe the changes that are proposed will help strengthen our ability to regulate charities and improve public trust and confidence. The improved digital service being offered will also result in a much easier service to use that is based on the needs of charities. The voice of charities and their umbrella bodies will be important to inform our approach and we look forward to engaging widely and constructively in the coming weeks.

The annual return is such a key tool and this is a great opportunity to improve it – and we would appreciate any help you can give us to engage widely with the sector. We will be involving charities in different ways alongside the formal consultation responses, for example through user-testing and roundtables.